The Razor's Edge

2-Year Price History

A Word Of Caution

Precision Drilling Trust Units (PDS) has experienced a very significant loss in market value recently. Clearly this drop in price will have an impact on the valuation but the recent events that caused the drop may have not been fully factored into our analysis yet. When a stock loses value very quickly it could be a sign that there is a fear of bankruptcy.

Of course, you may proceed to review our research report for this security, but please be aware that our model may not reflect significant factors surrounding this company.

Therefore, (and as always), check additional sources and available information regarding PDS before making an investment decision.

Ockham's Rating

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PDS Revenue

For a long time, value investors have used the current share price relative to sales per share levels as an important valuation tool. We utilize a historical weighted average methodology that treats recent years more importantly in the calculation. When looking at PDS through this framework, we can see that our weighted average historical high and low Price to Sales per share ratios over the last 5 years are 3.68x and 2.07x respectively.

Utilizing this range we can see that PDS’s current Price to Sales per share ratio of 1.06x is significantly below its average levels historically. In fact, with a current price of $7.97, PDS is a full 64% below its average Price to Sales ratio at comparable sales levels. This is a rare occurrence and, when taken in context of the other areas of our analysis, can be a strong positive for our outlook for PDS.

PDS Cash Earnings

When there is not enough positive Cash Earnings history available for a company, we at Ockham Research can find it quite difficult to actually rate their ability to generate cash. Such is the case with PDS. When a company has current positive cash earnings but not enough years of history to compare it to, we find the correlation of cash earnings to valuation significantly hindered. So with PDS, we will have to wait to see if there are a few more cycles of positive Cash Earnings numbers before we will be confident in our Cash Earnings analysis.

PDS Dividends

A strong dividend payment history is looked upon as a favorable characteristic on a company’s future and potentially can receive a positive Ockham rating. That being said, we don't require dividend payments for company's whose management has elected to forgo them entirely.

When reviewing dividend yields for PDS, we compare the historic high and low levels over the past, which is similar to our evaluation of Sales and Cash Earnings per share. Paying a dividend is not necessary for any company, but changes in dividend often can lend clues as to the health of the business. A rising dividend is a strong sign for an established company, as it reflects management's confidence in the company. PDS’s estimated annual dividend is $1.29 resulting in a current dividend yield of 16.19%. The highest dividend yield from PDS over recent history was 23.16% while the lowest dividend yield was 0.68%. If you are looking for some “bang for your buck” then a dividend yield of 35.82% above the historically median should be enticing. PDS receives a positive boost in our view because as you know, equity at its core is simply a claim on future dividends.